On the heterogeneous short-term effects of minimum wages on labor demand

Juan A. Correa, Francisco Parro

Research output: Contribution to journalArticlepeer-review

Abstract

A strand of the literature documents no effects or even positive effects of a higher minimum wage on employment. This evidence is frequently linked to the existence of monopsonistic labor markets or search frictions. However, empirical studies show that these findings could be related to a low short-term minimum wage–employment elasticity in a competitive labor market. We show that mixed theoretical employment effects of a minimum wage policy can be predicted in the short term in assignment economies with price-taker agents and no search frictions.

Original languageEnglish
Pages (from-to)184-195
Number of pages12
JournalInternational Journal of Economic Theory
Volume16
Issue number2
DOIs
Publication statusAccepted/In press - 1 Jan 2019

Keywords

  • employment
  • labor demand
  • minimum wage

ASJC Scopus subject areas

  • Economics and Econometrics

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